Correlation Between FG Merger and Spark I

Can any of the company-specific risk be diversified away by investing in both FG Merger and Spark I at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining FG Merger and Spark I into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FG Merger II and Spark I Acquisition, you can compare the effects of market volatilities on FG Merger and Spark I and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in FG Merger with a short position of Spark I. Check out your portfolio center. Please also check ongoing floating volatility patterns of FG Merger and Spark I.

Diversification Opportunities for FG Merger and Spark I

0.2

Correlation Coefficient

FG Merger  Spark I

Modest diversification

The 3 months correlation between FGMC and Spark is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding FG Merger II and Spark I Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spark I Acquisition and FG Merger is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on FG Merger II are associated (or correlated) with Spark I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spark I Acquisition has no effect on the direction of FG Merger i.e., FG Merger and Spark I go up and down completely randomly.

Pair Corralation between FG Merger and Spark I

Given the investment horizon of 90 days FG Merger is expected to generate 3.05 times less return on investment than Spark I. But when comparing it to its historical volatility, FG Merger II is 7.41 times less risky than Spark I. It trades about 0.08 of its potential returns per unit of risk. Spark I Acquisition is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,095  in Spark I Acquisition on September 14, 2025 and sell it today you would earn a total of  20.00  from holding Spark I Acquisition or generate 1.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

FG Merger II  vs.  Spark I Acquisition

FG Merger II

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in FG Merger II are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, FG Merger is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Spark I Acquisition

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spark I Acquisition are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Spark I is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with FG Merger and Spark I

The main advantage of trading using opposite FG Merger and Spark I positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FG Merger position performs unexpectedly, Spark I can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Spark I will offset losses from the drop in Spark I's long position.

The idea behind FG Merger II and Spark I Acquisition pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.